A.M. Best has placed under review with negative implications the financial strength rating of "B (Fair)" and the issuer credit rating of "bb" for Preferred Contractors Insurance Company (PCIC) Risk Retention Group.
These rating actions follow the filing extension to 1 September 2014 of the company's Q2 2014 financial statement granted by the State of Montana, requiring PCIC to obtain an actuarial review of loss and loss adjustment expense reviews, as of 30 June 2014.
The “under review with negative implications” status reflects A.M. Best's concern that the actuarial review could potentially result in additional adverse loss reserve development and, in that event, cause a deterioration in operating performance and risk-adjusted capitalisation.
The ratings will remain under review until the Q2 filing has been made, at which time the ratings will likely be taken out from under review following a review of the company's latest financial position.
A.M. Best continues to monitor the quarterly performance of PCIC. Any material negative deviation from the business plan in terms of management, operating profitability and risk profile, or a decline in its risk-adjusted capitalisation could result in negative rating pressure.
Factors that could lead to positive rating movement are evidence of sustained favourable operating performance and credit metrics that improve risk-adjusted capitalisation over the long term.
